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5 (Prepared from a situation suggested by Professor John W. Hardy.) Lone Star Meat Packers is a major processor of beef and other meat products.
5 (Prepared from a situation suggested by Professor John W. Hardy.) Lone Star Meat Packers is a major processor of beef and other meat products. The company has a large amount of T-bone steak on hand, and it is trying to decide whether to sell the T-bone steaks as they are initially cut or to process them further into filet mignon and the New York cut. of the T-bone steaks are sold as initially cut, the company figures that a 1-pound T-bone steok would yield the following profit: Selling price ($2.10 per pound) $ 2.10 Les Joint costs incurred up to the split-off point where T-bone steak can be identified as a separate product 1.50 Profit per pound $ 0.60 56.01 If the company were to further process the T-bone steaks, then cutting one side of a T-bone steak provides the filet mignon and cutting the other side provides the New York cut. One 16 ounce T-bone steak cut in this way will yield one 6-ounce filet mignon and one 8-ounce New York cut the remaining ounces are waste. It costs $0.12 to further process one T-bone steak into the filet mignon and New York cuts. The filet mignon can be sold for $4.40 per pound, and the New York cut can be sold for $3.10 per pound. Required: 1. What is the financial advantage (disadvantage) of further processing one T-bone steak into filet mignon and New York cut steaks? 2. Would you recommend that the T-bone steaks be sold as initially cut or processed further
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